China&#8217;s corporate liabilities totalled 107% of GDP

Beijing Business Today reports that China's corporate liabilities amounted to 107% of GDP by the end of 2011, according to Li Yang, the vice president of the Chinese Academy of Social Sciences.

Using the data from People's Bank of China (Balance sheet of other depository corporations), the total outstanding claims on non-financial corporations amounted to about RMB46.5 trillion, which was almost 100% of the nominal GDP for the year of 2011. Thus we think the 107% debt-to-GDP ratio for corporate debt is probably not too far off. We also noted for a number of times that Chinese banking assets amounted to more than twice of China's annual GDP, highlighting the reality that China has more debt within the economy (and many of the debts are hidden, thus not included in some of these statistics).

According to Li Yang, the corporate liabilities-to-GDP ratio for China is the highest in the world.

It is hard to tell just based on this number whether this is particularly alarming, not to mention that there are more debts in China hidden. However, high level of debt, on-going weakness in the economy and easing inflation pressure (growing risk of persistent deflation) fits with our view that China is in a debt deflation.